The Atari 2600, released in October 1977, was the first successful video game console to use plug-in cartridges instead of having one or more games built in. Originally known as the Atari VCS (for Video Computer System) the machine's name was changed to Atari 2600 (from the unit's Atari part number - CX2600) in 1982, after the release of the more advanced Atari 5200. It was wildly successful, and during the 1980s, Atari was a synonym for this model in mainstream media. The 2600 was typically bundled with two joystick controllers, a conjoined pair of paddle controllers, and a cartridge game.

Six switches (original version): Power on/off, TV signal (B/W or Color), Difficulty for each player (called A and B), Select, and Reset. Except for the power switch, games could (and did) assign other meanings to the switches. On later models the difficulty switches were miniaturized and moved to the back of the unit.

Output: B/W or Color TV picture and sound signal through RCA connector (NTSC, PAL or SECAM, depending on region; game cartridges are exchangeable between NTSC and PAL/SECAM machines, but this will result in wrong or missing colors and often a rolling picture.)

Although not formally discontinued, the 2600 was de-emphasized for two years after Warner's 1984 sale of Atari's Consumer Division to Commodore Business Machines founder Jack Tramiel, who wanted to concentrate on home computers. In 1986, a new version of the 2600 was released (although it was planned for release two years earlier). The new redesigned version of the 2600, unofficially referred to as the 2600 Jr., featured a smaller cost-reduced form factor with a modernized Atari 7800-like appearance.

The redesigned 2600 was advertised as a budget gaming system (under $50) that had the ability to run a large collection of classic games. With its introduction came a resurgence in software development both from Atari and from third parties. The Atari 2600 continued to sell in the USA and Europe until 1990, and continued to sell the PAL version in Asian nations until the early 1990s.

Over its lifetime, an estimated 25 million units were shipped, and its video game library reportedly numbers more than 900 titles. In Brazil, the console became extremely popular in the mid-1980s. The Atari 2600 was officially retired by Atari Corporation on January 1, 1992, making it the longest-lived home video game console in US game history. It had a lifespan of 14 years and 2 months, nearly three times the typical lifespan of a console.

The initial price was US$199 with a library of 9 titles. In a play to compete directly with the Channel F, Atari named the machine the Video Computer System (or VCS for short), as the Channel F was at that point known as the VES, for Video Entertainment System. The 2600 was also rebadged as the Sears Video Arcade and sold through Sears-Roebuck stores. When Fairchild learned of Atari's naming, they quickly changed the name of their system to become the Channel F. However, both systems were now in the midst of a vicious round of price-cutting: PONG clones made obsolete by these newer and more powerful machines sold off their boxes to discounters for ever-lower prices. Soon many of the clone companies were out of business, and both Fairchild and Atari were selling to a public that was completely burnt out on PONG. In 1977, Atari sold only 250,000 VCSs. In 1978, only 550,000 units from a production run of 800,000 were sold, requiring further financial support from Warner to cover losses. This led directly to the disagreements that caused Atari founder Nolan Bushnell to leave the company in 1978.[original research?]

Once the public realized it was possible to play video games other than PONG, and programmers learned how to push its hardware's capabilities, the 2600 gained popularity. By this point, Fairchild had given up, thinking video games were a passed fad--thereby handing the entire quickly growing market to Atari. By 1979, the 2600 was the best selling Christmas present (and console), mainly because of its exclusive content, and a million were sold that year.

Atari then licensed the smash arcade hit Space Invaders by Taito, which greatly increased the unit's popularity when it was released in May 1980, doubling sales again to over 2 million units. The 2600 and its cartridges were the main factor behind Atari grossing more than $2 billion in profits in 1980. Sales then doubled again for the next two years, with almost 8 million units selling in 1982.

During this period, Atari expanded the 2600 family with two other compatible consoles. They designed the Atari 2700, a wireless version of the console that was never released because of a design flaw. The company also built a sleeker version of the machine dubbed the Atari 2800 to sell directly to the Japanese market in early 1983, but it suffered from competition with the newly released Nintendo Famicom.

During this period, Atari continued to grow until it had one of the largest R&D divisions in Silicon Valley. They spent much of their R&D budget on projects that seemed rather out of place at a videogame (or even home computer) company; many of these projects never saw the light of day. Meanwhile, several attempts to bring out newer consoles failed for one reason or another, although their home computer systems, the Atari 8-bit family, sold reasonably, if not spectacularly. Warner was more than happy anyway, as it seemed to have no end to the sales of the 2600, and Atari was responsible for over half of the company's income.

The programmers of many of Atari's biggest hits grew disgruntled with the company for not crediting game developers. For example, Rick Mauer, the programmer of Atari 2600 Space Invaders, received no credit and made only $11,000 for his efforts, in spite of the cartridge grossing more than $100 million in sales. Most notably, Warren Robinett, the lead programmer of Adventure, in protest against Atari's anonymity policy, hid his name in a secret room within the game. This was one of the first "Easter eggs"—a hidden treat or in-joke—a practice which continues in software development to this day. Many other programmers left the company and formed their own independent software companies. The most prominent and longest-lasting of these third-party developers was Activision, founded in 1980, whose titles quickly became more popular than those of Atari itself. Atari attempted to block third-party development for the 2600 in court but failed, and soon other publishers, such as Imagic and Coleco, entered the market. Atari suffered from an image problem when a company named Mystique produced a number of pornographic games for the 2600. The most notorious of these, Custer's Revenge, caused a large number of protests from women's and Native American groups. Atari sued Mystique in court over the release of the game.

Atari continued to scoop up licenses during the shelf life of the 2600, the most prominent of which included Pac-Man and E.T. Public disappointment with these two titles and the market saturation of bad third-party titles are cited as big reasons for the video game crash of 1983. Suddenly, Atari's growth meant it was losing massive amounts of money during the crash, at one point about $10,000 a day. Warner quickly grew tired of supporting the now-headless company, and started looking for buyers in 1984.

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